alleryStart learning →A birdbath selling for 100 dollars with 40 dollars of variable cost has a contribution margin of:
A40 dollars
B100 dollars
C140 dollars
D60 dollars
Answer & Solution
Correct answer: D. 60 dollars
1. Contribution margin is a subtraction, not a ratio.
2. Contribution margin is the amount by which selling price exceeds total variable cost per unit.
3. The selling price here is 100 dollars.
4. The total variable cost per unit is 40 dollars.
5. Subtracting gives a contribution margin of 60 dollars.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 3 'Cost-Volume-Profit Analysis'_
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